What is in store this New Zealand tax time?

When advising clients this financial year, New Zealand tax practitioners will need to consider tax debt enforcement, making use of business investment incentives and impending changes to shareholder current accounts.

In addition, employers will need to prepare for a 0.5 per cent increase to the default KiwiSaver contribution rate on 1 April 2026. 

And, with an election year looming, practitioners should keep apprised of potential tax changes emanating from the 2026 Budget and the prospect of a capital gains tax being introduced under a Labor government.

Below are the key considerations for practitioners and clients alike.

Cracking down on outstanding debts

Inland Revenue (IR) is intensifying its enforcement efforts to recover an estimated NZ$9 billion in overdue tax debt.

It has already started calling customers with GST or employer tax debts of more than NZ$1000 between six months and five years old to let them know the amount of their overdue debt and to point out that they are incurring penalties and interest.

Where GST and/or employer debt exceeds NZ$10,000, IR is reminding people of their tax obligations and the possible legal consequences of ignoring them.

In a recent statement, IR noted: “Where we don’t get a response to our first call, we’ll leave a message asking for customers to call us. If there’s still no response, we’ll make one more attempt to contact them but won’t leave another message. If there’s still no word from a customer, we may visit them in person.”

The final two options to resolve the debt are to take money owed directly from bank accounts or start insolvency proceedings.

Areas of focus

In the 2024–25 financial year, IR conducted close to 18,000 visits to business premises and worksites, opened over 7600 audits and completed around 6150 audits. It initiated 50 prosecutions, completed 30 and issued over 88,000 deduction notices under section 157 of the Tax Administration Act 1994. In addition, IR filed for 1875 business liquidations.

“Taxpayers, particularly corporate taxpayers, have been put on notice that there’s a lot more IR activity,” says Andrew Dickeson FCPA, Director at accounting and business advisory firm Baker Tilly Staples Rodway in Auckland.

“If you owe tax, expect a call from Inland Revenue. You can either stick your head in the sand and just hope that they don’t call or come, or you can get on the front foot and get in contact.

“Advisers should be proactive by getting in contact with their clients and doing some upfront reviews, looking for errors or ways to improve the tax part of their business.”

Dickeson says business owners should consider taking out audit insurance to cover their accountant’s costs in the event IR initiates an audit.

IR is focusing its enforcement in areas where non-compliance (including tax evasion) is known to be occurring, including in the property sector, where in 2023–24, it uncovered more than NZ$150 million in undeclared income tax and GST.

Other focus areas include income being sheltered inside trusts to avoid higher taxes and undeclared cash transactions. It is also examining persistent non-filing entities, high turnover entities, company losses, trust distributions and losses to beneficiaries, income splitting, diverted personal services and foreign owned small-to-medium enterprises.

Dickeson notes that IR is also monitoring sole traders and small businesses that have not previously registered for GST because their turnovers had been under NZ$60,000. However, he says many are now liable for GST as a result of their turnover creeping over NZ$60,000 in the last 12 months.

The Investment Boost scheme

The Investment Boost scheme was introduced in the 2025 Budget, allowing businesses to claim an upfront 20 per cent deduction on the cost of qualifying new capital assets, in addition to standard depreciation, to encourage investment and productivity growth.

There is no cap on the number or value of assets eligible for the scheme.

Generate Accounting Managing Director, Angus Ogilvie FCPA, says the Investment Boost scheme is significant and businesses should be taking advantage.

“For example, if you buy a NZ$100,000 vehicle, 20 per cent of that can be claimed in the first year. Then of the remaining NZ$80,000, you’re entitled to claim 30 per cent of that. So, in total, you’d claim NZ$44,000 worth of depreciation in year one.

“There are big incentives and it’s important for accountants to check with their clients to make sure they are aware of the scheme.”

Eligible assets include machinery, tools, equipment and work vehicles, new commercial and industrial buildings, and on imported second-hand assets if they have not been used in New Zealand before.

KiwiSaver increases

A major upcoming change is the increase in voluntary KiwiSaver contributions from 3 per cent to 3.5 per cent on 1 April 2026, which will lift combined employer and employee contributions from 6 per cent to 7 per cent. Additionally, the eligibility age for contributions will be lowered to include 16- and 17-year-olds, expanding the scheme’s reach.

Ogilvie notes that it comes at no direct cost to the government, as the increased contributions are taxed and ultimately boost government revenue through the employer superannuation contribution tax (ESCT).

Shareholder current accounts

In December, IR released a consultation paper titled Improving Taxation of Loans Made by Companies to Shareholders, which outlines its concern that the current tax treatment of shareholder current accounts (loans) is inadequate.

For the 2024 tax year, IR data shows about 5550 companies had outstanding loan balances of more than NZ$1 million each.

IR notes that shareholders withdrawing funds as a loan from a company, rather than declaring them as personal income, can pay loan interest at the 28 per cent corporate tax rate, potentially avoiding having to pay the 39 per cent top marginal income tax rate. Some shareholder loans are not being repaid at all.

IR is now proposing to treat shareholder loans that exceed NZ$50,000 per company — made on or after the date of its consultation paper — as dividends, if a loan is not repaid within a set period. IR is also proposing that any shareholder loans that remain outstanding at the time a company is removed from the Companies Register should be treated as income of the shareholder.

“This has the potential to be quite impactful for small to medium-sized enterprises because owners would have to start clearing out their overdrawn current accounts and declare them as income in their own name,” Ogilvie says. 

“It’s an important area for practitioners to keep an eye on.”